Markets’ Anxiety Isn’t Felt by Some Prominent Money Managers

October 7, 2013, 6:35 p.m. ET

Markets’ Anxiety Isn’t Felt by Some Prominent Money Managers

Theme Prevailed Among Investors Who Spoke at The Wall Street Journal’s Heard on the Street Live Conference

STEVEN RUSSOLILLO and DAVID BENOIT

Anxiety is spreading through financial markets in the second week of the partial federal-government shutdown, but several prominent money managers don’t share it. “I’m not nervous at all. Not in the slightest bit,” said Bruce Richards, chief executive at Marathon Asset Management. “There’s no fear running through the bones. Maybe there should be, but there isn’t.”This theme was prevalent among investors who spoke Monday at The Wall Street Journal’s Heard on the Street Live conference at The Pierre hotel in New York City. As stocks have slipped in 10 of the past 13 trading days, many investors at the conference said they have used the decline to snap up shares. And they are positioned to buy more should the market keep falling, they say.

That is mostly because they don’t think the shutdown will last, nor, more important, do they fear the U.S. will fail to make payments on debt coming due. “This is going to be something that will be fascinating to watch, but the result of a real default would be so calamitous I just don’t think we are going to get there,” said Jes Staley of BlueMountain Capital Management LLC and former head of investment banking at J.P. Morgan Chase JPM -1.59% & Co.

Clifton Robbins, founder and chief executive of Blue Harbour Group LP, said he is buying now and would be more aggressive should fear deeply infiltrate the market. “I hope we don’t get the lurching fear. But if we do, it will be a good buying opportunity,” he said.

From the government shutdown, to the Federal Reserve’s bond-buying policies, to the stock market’s run to record highs, the investing themes ran the gamut at the Heard conference. One take-away from these powerful, and unquestionably wealthy, hedge-fund managers was that they view income inequality in the U.S. as a serious problem.

“The inequality is unprecedented,” said Richard Robb, co-founder and chief executive at Christofferson, Robb & Co.

James Chanos, who runs hedge-fund firm Kynikos Associates, in particular suggested economic divisions will lead to some sort of readjustment in political and fiscal policies. He is worried that five years after the financial crisis, people have concluded the “game isn’t fair.”

Mr. Chanos, a known “short seller” who bets against stocks, launched into a soliloquy on recent frenzied stock moves in Tesla Motors Inc., TSLA +1.15% the stock-market darling that has risen more than 400% this year, and Netflix Inc., NFLX -2.78% up more than 200%.

“The problem [with] Tesla and Netflix…is they have gone beyond an interesting product or innovation, to becoming cult stocks…despite the fundamentals,” Mr. Chanos said at the conference.

He pointed to an analyst who raised a price target for Tesla on Monday morning using 10 years’ worth of cash flow in the calculation, with just a fraction of the projected cash flow coming before 2020.

He said investors are “chasing momentum because it’s working.”

A Netflix spokesman declined to comment; a representative for Tesla didn’t immediately respond to a request for comment.

As for banking, Mr. Staley said consolidation is “one thing that’s off the table for some time.” He expects little in the way of deal activity in banking or organic growth to create more so-called “universal banks.” Such limits, he said, will help the current group of megabanks to “regain the pricing power that Wall Street has historically had.”